There is no question that the global financial crisis is having serious effects on sub-Saharan Africa. The IMF expects economic growth in the region to reach only 3.3 percent this year - only about one-half of the average growth rate over the past decade.
As growth around the world has practically come to a halt, so has demand for Africa’s products. Thus, for example, as consumers in the United States and Europe cut back, there is less demand for exports from the region. Moreover, the prices for commodities like oil and copper have plunged.
Investors around the world are re-assessing their plans. Investments in Africa’s stock and bond markets have fallen already. Moreover, with weakening growth prospects and tight credit markets, it is likely that investors will cut back on their direct investments this year.
Until now, the solid growth of these investments had been a welcome payoff to the continent’s reform efforts. Meanwhile, Africans working abroad are facing worsening employment prospects so there is a serious risk that they will reduce remittances to their families back home.
All these changes are putting pressure not only on the incomes of individual Africans but on the budgets of their governments as well.
As demand for African exports falls, companies earn less, and governments take in less in taxes.
With the Government of Tanzania, we are calling a conference March 10-11th in Dar es Salaam where African countries can learn from each other’s successes, talk about the best ways to respond to the effects of the global financial crisis, and advise us at the IMF how we can best help them meet their goals for their people.
The good news is that many African economies are now much healthier than they were, say, 10 years ago. Many countries have built up comfortable levels of foreign exchange reserves that provide a cushion while these countries adjust to the new economic environment.
Low levels of public debt and high savings in recent years provides some countries with the scope to sustain or even increase government spending and widen deficits, without risking instability. In other cases, however, financing constraints limit this scope.
The International Monetary Fund is working with its member countries in Africa to help them ensure that the global crisis does not wipe out the hard-won gains of recent years.
To that end, the IMF provided increased financial support to countries that were hit hard by last year’s surges in food and fuel prices, and recently introduced a new more flexible financing facility for countries hit by unexpected shocks.
We are also providing technical assistance—sending in experts to help our African members strengthen their economic management capacity. We already have three Regional Technical Assistance Centers in the continent, and we plan to open two more.
And finally, we are providing policy advice, drawing on the experience of working with other countries, on how to meet the challenges of a global slowdown.
We are encouraging countries to keep focused on their goals not just for this year but for the next several years, so that in responding to the present, governments do not impoverish themselves for the future.
More broadly, the international community has a key role to play. In this challenging time for Africa, it is essential that the international community meet its commitments to provide financial support.
Beyond that, it is critical that the region is able to benefit from an open trading system because, over time, this remains central to its economic development.
Africa cannot avoid the problems facing the global economy, but working together, we can ensure that countries preserve the foundation of their recent success so that they can benefit when the global economy recovers.
ANTOINETTE M. SAYEH is the DIRECTOR, AFRICAN DEPARTMENT INTERNATIONAL MONETARY FUND